Americans to Big Oil: We’ve Got Your Number

The Facts Behind the Oil Tax Loopholes and Windfall Profits

SOURCE: AP/Kirsty Wigglesworth

A sign at a BP petrol station is seen in London. Senate Democratic leaders are determined to stem unnecessary tax subsidies flowing to the five biggest oil companies—BP p.l.c, Chevron Corp., ConocoPhillips, Exxon Mobil Corp., and Royal Dutch Shell p.l.c.

The numbers don’t lie. Tax loopholes allow Big Oil companies to ratchet up their annual earnings at the expense of American taxpayers. Well-placed campaign contributions to their congressional allies preserve these undeserved handouts.

Americans eager to reduce the mammoth federal debt that threatens our economy’s long-term prosperity overwhelmingly support ridding the tax code of these unnecessary subsidies. As Seth Hanlon, Director of Fiscal Reform, and Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress, explain, tax breaks for oil companies and other superfluous “spending in the tax expenditure budget is fertile ground for deficit reduction.” But on May 5, Republicans unanimously voted down a Democratic attempt to put forward legislation that would end subsidies to oil companies. Seven Democrats also opposed the measure.

So here is a by-the-numbers examination of what Big Oil is costing us, plus a few examples of where the billions of dollars salvaged from their balance sheets might be better spent.

What oil tax dollars could buy

$30 billion for Medicare if tax loopholes were eliminated for all Big Oil companies. This would offset the Medicare cuts in the fiscal year 2012 budget resolution that was passed by the House on April 15.

$1 billion could pay the salaries of 18,000 high school teachers earning an average of $55,000 per year.

$1 billion could pay for 251,000 Pell Grants to aspiring college students. These grants are essential to help these scholars pay for tuition, and averaged $3,984 apiece in 2011.

Senate Democratic leaders are determined to stem these unnecessary subsidies flowing to the five biggest oil companies—BP p.l.c., Chevron Corp., ConocoPhillips, Exxon Mobil Corp., and Royal Dutch Shell p.l.c. The Senate is expected to vote next week on the Close Big Oil Tax Loopholes Act (S. 940), introduced by Sens. Robert Menendez (D-NJ), Sherrod Brown (D-OH), Claire McCaskill (D-MO), and 24 other senators. It would close $2 billion worth of tax loopholes for these five companies. Senate Majority Leader Harry Reid (D-NV) and Finance Chairman Max Baucus (D-MT) also support cutting off the corporate welfare given to these oil companies.

On May 12, the CEOs of the big five oil companies will testify about these tax loopholes before the Senate Finance Committee. Hopefully they will explain how they can justify spending billions of dollars on these tax loopholes when other priorities face severe cuts.

Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress. Valeri Vasquez is a Special Assistant on the Center’s Energy Opportunity policy team.